Forex Indicator – How To Trade Using Moving Averages

Moving Averages is one of the best forex indicator that can be a very good way to indicate to you whether you should go long or go short in any trade. I usually use the 20 EMA, 50 EMA and the 200 EMA to help me in placing my trade.

All you need to plot on your charts are the 20 EMA, the 50 EMA and the 200 EMA. In fact, the 200 EMA has been voted by forex traders as the top Forex indicator among the 99 other indicators available.

Whenever the 20 and 50 EMA is cutting north of the 200 EMA, it is indicating that the price is in an uptrend and you should be looking for other Forex indicators to signal you to enter a trade.

Please do not trade based on moving averages as there may be time where the trend may move against you.

The best way will be to look for a confluence of events with other Forex indicators such as trendline break, reversal candle or MACD before you enter the trade. I will only enter any trade if there are at least three Forex indicators signaling the same price movement to me.

If you find any two of the three moving averages to be moving in the horizontal patterns, you should avoid using moving averages as one of the Forex indicators for the time being as moving averages do not perform so well during consolidation.

Moving averages work best during a trending price movement and you can see it from the steepness of the lines. A trending price movement is indicated by a steep moving averages and this is the best time to trade with moving averages.

Below are how you can check the trend and momentum of the currency pairs you are trading using moving averages

How To Determine Trend:

• When the shorter term EMAs cut above the longer term EMA, it is an indication of an uptrend
• When the shorter term EMAs cut below the longer term EMA, it is an indication of a downtrend

How To Determine Strength/Momentum of a Trend:

• When the gradient of the EMAs are steep, it is telling you that the current trend of the market is pretty strong
• When the gradient of the EMAs are gentle, it is telling you that the curent trend of the market is pretty weak

Examples

Strong Trend

Weak Trend

No Trend

With these information in mind, I hope that you can make money with the help of the moving averages as it is very easy and simple to use.

Look out for my subsequent post about Forex indicator as I will be going through the other Forex indicator that I am personally using and hope that you can benefit from them as well.

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